Urban Landowner Liability for the Presence of Contaminated Soil and Groundwater

August 17, 2016
By
Isaiah Liu

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The purchase of real estate in urban communities can come with its own
set of unique legal challenges that potential landowners should fully
understand and consider prior to closing on the purchase of any such property.
One of these unique challenges is the discovery of contaminated soil and
groundwater on recently acquired property due to the illegal release or
storage of hazardous wastes by a former or adjacent landowner.

Due to the high density of city lots and the close proximity of residential
structures to commercial businesses in urban communities, the presence
of contaminated soil and groundwater on urban properties is a real risk
potential purchasers must consider. While a potential purchaser may reduce
the risk of acquiring contaminated property by paying for a title opinion
and requesting a disclosure statement from the seller, often times these
reports provide little, if any, information on the land-use activities
of historic owners and those of neighboring properties. As such, if after
purchasing a new property a landowner discovers that the soil and/or groundwater
on the land is contaminated due to the illegal disposal or storage of
hazardous wastes by a former or neighboring landowner, the new owner may
be liable for the costs and expenses associated with the removal and clean-up
of said contamination unless the new owner can establish by a preponderance
of the evidence a defense to clean-up liability provided for in the Texas
Solid Waste Disposal Act.

Accordingly, prior to the purchase of any urban property, potential landowners
should be diligent about investigating not only the chain of title associated
with the property, but the land-use activities of former and neighboring
property owners. If contaminated soil or groundwater is discovered prior
to, or after, the purchase of any such property, landowners should seek
legal counsel knowledgeable in available state programs that may protect
innocent purchasers of contaminated land.

Liability for Clean-up Costs

Liability for the costs to clean-up groundwater or soil contaminated by
the illegal disposal and storage of solid and hazardous wastes is governed
by the Comprehensive Environmental Response, Compensation and Liability
Act, also known as CERCLA, and the Texas counterpart in Chapter 361 of
the Texas Health and Safety Code known as the "Texas Solid Waste
Disposal Act." Under the Texas Solid Waste Disposal Act, a landowner
of contaminated land is considered a potentially responsible party (PRP),
liable for all clean-up costs, regardless of whether or not the current
owner was actually responsible for the release of the hazardous waste.
Texas Health and Safety Code Sec. 361.271. Liability for clean-up costs is strict, joint and several, and can be
applied retroactively; in other words, all current and former landowners
may be liable for the total cost of clean-up.

HYPOTHETICAL:

Question: If the State determines that a former landowner is responsible for the
release of chemical (X), a highly serious hazardous waste that is costly
to clean-up, and the current landowner is responsible for the release
of chemical (Y), a less serious hazardous waste that is cheaper to clean-up,
are the current and former landowners jointly responsible for the entire
clean-up cost, even though chemical (X) costs the most to remove?

Answer: Yes, both landowners are held joint and severally liable for all clean-up
costs unless one can make a sufficient showing that their chemical contribution
is divisible from the rest of the land and the clean-up costs (this is
often times extremely difficult to prove).

Avoiding Joint and Several Liability

"Innocent Owner Defense"

Under the Texas Solid Waste Disposal Act, the owner of contaminated land,
a PRP, is responsible for all clean-up costs unless they can establish
by a preponderance of the evidence that the release of hazardous materials
was caused solely by one of the following acts:
Texas Health and Safety Code Sec. 361.275(a)

(1) An act of God (Unforeseen);

(2) An act of war (During combat);

(3) An act or omission by a third party, the "Innocent Land Owner
Defense;" or

(4) Any combination of (1), (2) and (3).

If a PRP wants to avail themselves to the protections of the "Innocent
Land Owner Defense," the PRP must establish by the preponderance
of the evidence that the PRP exercised due care concerning the solid waste,
considering the characteristics of the solid waste, in light of all relevant
facts and circumstances; and took precautions against foreseeable acts
or omissions of the third person and the consequences that could foreseeably
result from those acts or omissions.
Texas Health and Safety Code Sec. 361.275(b). However, a PRP may not claim the "Innocent Land Owner Defense"
if the third party is an employee or agent of the PRP, or the third party
has a direct or indirect contractual relationship with the PRP and the
act or omission of the third person occurred in connection with the contractual
relationship.
Texas Health and Safety Code Sec. 361.275(c). The latter exception is of importance due to the fact that a real estate
sales contract or a deed conveyance may be considered a "contractual
relationship" that could void a landowner's claim to the "Innocent
Owner Defense."

If a landowner, PRP, is subject to liability due to the contractual relationship
it had with the former owner of the contaminated property, the PRP may
still be able to claim the "Innocent Owner Defense" if they
can establish by a preponderance of the evidence that:
Texas Health and Safety Code Sec. 361.275(e)

(1) The landowner, a PRP, has satisfied the requirements of Texas Health
and Safety Code Sec. 361.275(b), see above;

(2) At the time the PRP acquired the property the PRP did not know and
had no reason to know that a hazardous substance that is the subject of
the release or threatened release was disposed of on, in, or at the property; or

(3) The PRP acquired the facility by inheritance or bequest.

In order to demonstrate the condition under item (2) above, the PRP must
have made, at the time of the property acquisition, appropriate inquiry
into the previous ownership and uses of the property consistent with good
commercial or customary practice in an effort to minimize liability. In
deciding whether the PRP meets this condition, the court shall consider:

(1) Any specialized knowledge or experience of the PRP;

(2) The relationship of the purchase price to the value of the property
if the property were uncontaminated;

(3) Commonly known or reasonably ascertainable information about the property;

(4) The obvious presence or likely presence of contamination of the property; and

(5) The defendant's ability to detect the contamination by appropriate
inspection.

If a landowner established, by a preponderance of the evidence, that they
are protected from liability under the "Innocent Owner Defense,"
the landowner should be aware that if the property value increases as
a result of the State's remedial actions, the State may place a lien
on the property for the difference in the market price contributable to
the State's clean-up efforts.

DISCLAIMER: The foregoing information is not legal advice and is general in nature
and not applicable to all situations. The reader should
not rely on these general statements and should consult with knowledgeable
persons before taking any actions.

The information on this website is for general information purposes only.
Nothing on this site should be taken as legal advice for any individual
case or situation. This information is not intended to create, and receipt
or viewing does not constitute, an attorney-client relationship.